SUMMARY OF THE FINDINGS:
Stanford University recently collaborated with the Tony Elumelu Foundation in a report to understand the entrepreneurial mindset of startup African entrepreneurs. The detailed report revealed interesting insights into the minds of the select group – a random selection of entrepreneurs who applied to the Tony Elumelu Foundation(TEF) between 2015 and 2017.
A summary of the findings:
1. The Report Records that Women Have Less Profitable Businesses than their Male Counterpart
The report reads that while women make up the majority of entrepreneurs on the continent, they have less profitable businesses and more stagnant growth compared to men’s businesses. The differences across gender are not a uniquely African problem. In the United States, for example, men comprise over 90% of the partners in the top 100 venture capital firms and receive a disproportionate amount of funding.
2. African entrepreneurs do not consider capital as one of the initial discussions to have during the startup stage.
It is common to see “profit”, “growth” or “capital” appear prominently in word clouds of entrepreneurs’ espoused motivations, but these are noticeably absent from the espoused motivations of the African entrepreneurs in the pool studied. One key difference is the absence of a discussion of capital as a motivation for founding a business.
Instead words focused on specific products, services and industries appear. It is also striking that worlds like “community”, “country” and “local” appear often.
Instead words focused on specific products, services and industries appear. It is also striking that worlds like “community”, “country” and “local” appear often. There is something truly inspiring about the narratives of these entrepreneurs, and in particular, their focus on community and country.
3. Entrepreneurs from Different African Regions Are Driven By Different Motivations
The report delved into the differences in the way Nigerians and non-Nigerians expressed their business motivations. We found that there were sharp distinctions in how Nigerians versus non-Nigerians described them. There was a strong social justice orientation for non-Nigerians, as they described their reasons for doing entrepreneurship with words such as “community” as well words that described their products/services or businesses such as “farmers”, “rural”, and “development”.
Nigerians described their motivations for becoming entrepreneurs, in contrast, with profit-oriented language, such as “sales” and “customers.”
Further, the report looked at differences across Northern, Western, Eastern, and Central Africa. In North Africa, entrepreneurs mentioned more project-based work. In Eastern and Western Africa, there was a greater emphasis on farming and agriculture. Central African entrepreneurs had a lot of overlap in how they discussed why they became entrepreneurs with Eastern Africans.
4. Women Approach Entrepreneurship Differently From Males
The starkest differences reported were not by region, but by gender. Women and men described their motivations very differently. The study questions the theory that to a degree men and women are approaching entrepreneurship differently.
The report summarises this point with: Some have argued, “expanding the opportunities for female entrepreneurs through policies that foster gender equality would have a tremendous impact on Africa’s growth” (World Bank, 2018), and it is in the spirit of considering the overall aims of TEF that has been an extremely strong advocate for entrepreneurs that we point out the descriptive differences we see by gender from 2015-2017.
5. The Exchange vs. the Organisational Mindset of Entrepreneurs
The report states that the exchange mindset is characterised by a micro-level, ‘on-the-ground’ view of what the entrepreneurs and their companies are doing. In particular, entrepreneurs with an exchange mindset cared greatly about the exchange of products and/or services, their relationship with their employees and customers, and providing value to others.
In the second category, which the report calls the “organization mindset”, entrepreneurs focused on ‘being an entrepreneur’. These applicants discussed a more macro-level view of themselves and their activities. Rather than orienting themselves around the exchange of products and/or services with customers, they oriented themselves around their purpose of creating and growing a company. The study found that individuals with this mindset often discussed growth and performance, managing people and assets, and industry dynamics.
The report concludes that entrepreneurs’ mindsets vary in three main ways. First, in the conceptualization of what they and their companies are doing – whether it is exchanging products and/or services with customers or if their attention is directed toward the characteristics of their business and its performance and expansion. Second, that these two mindsets manifested differently in how entrepreneurs viewed themselves and their motivation. Finally, the two mindsets diverged in how entrepreneurs discussed their management style and how they view their employees.